China Stocks Surge Sharply On U.S.-China Trade Optimism

Chart of the Shanghai Composite Index (SSEC)

Chart of the Shanghai Composite Index (SSEC) – Source: TheTechnicals.com and TradingView

We’ve been talking a lot about U.S.-China trade lately, but there’s a good reason for that. It’s a primary market driver at the moment. Of course, this will almost certainly change down the road. But for now, all eyes are on the unfolding trade negotiations between U.S. President Trump and Chinese President Xi Jinping. Recently, the news has been pretty much all good. This has helped fuel strong rallies for both U.S. and Chinese stocks. On Monday especially, China stocks surged sharply on U.S.-China trade optimism. The Shanghai Composite Index (SSEC), which is the major Chinese index comprising all stocks traded on the Shanghai Stock Exchange, rallied more than 5%. This was the best single-day gain since 2015. Not an easy feat.

Trump Postpones New Tariffs Ahead of Planned Summit

As might have been expected, Trump postponed the March 1st deadline when the 90-day trade-war ceasefire between the two countries was supposed to end. With this waiver, new tariffs that were slated to be imposed on Chinese imports were also delayed indefinitely. This move was in advance of a planned summit between the two presidents at Trump’s Mar-a-Lago club in Florida in late March.

The Technicals – China Stocks Receive Big Boost

These and other positive developments in U.S.-China trade talks have benefited Chinese stocks substantially. If we take a look at the chart of the Shanghai Composite Index (SSEC) above, the effect on China stocks is clear.

From a technical analysis perspective, the Shanghai Composite formed a double-bottom chart pattern in October and January. This is a bullish chart pattern, but only if price subsequently breaks out above the peak between the two bottoms. And the Shanghai Composite did just that in mid-February. From there, price continued to rise and hit its double-bottom pattern’s measured target on Monday. According to technical analysis, this is simply the price distance between the double-bottom lows to the peak between the bottoms – then projected up from the point of breakout to determine the price target. As noted, this was hit pretty much on the dot on Monday.

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Disclosure:  At the time of this article’s publication, we have no position in any security or trade/investment mentioned, nor do we have any business relationship with any company ...

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